Rather alarming statistics report that the Agency Workers Regulations 2010, which came into force on 1 October 2011, could cost UK businesses more than £1.5 billion per year. How might these costs arise and what do the Regulations mean for hirers?

Under the Regulations, after 12 weeks' service in the same role with the same hirer, agency workers will be entitled to the same basic working conditions as those in an equivalent permanent role, including pay. Agency workers will also have certain "day one" rights, including access to the hirer's collective facilities and amenities.

Hirers therefore need to carefully calculate when an agency worker has accrued 12 weeks' service so as to qualify for equal pay (note that certain elements of pay are excluded) as this could result in additional wages being paid in order to comply with the Regulations. Will hirers be left to bear the brunt of these additional costs? Businesses are being urged to undertake a cost analysis to assess the additional costs and review their commercial terms and conditions with agencies to ensure they are protected and any risk has been assigned properly.

It is believed that one third of hirers will stop using agency workers altogether and look at alternatives such as engaging independent contractors, using zero hour contracts or the "Swedish derogation" (which provides a potential exemption if workers are paid between assignments). Whether the use of agency workers still provides a flexible and cost efficient solution for hirers will remain to be seen.